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Banks Accused Of Using Mortgage Debt Leniency To Flatter Numbers

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The City watchdog has accused Britain's banks of moving struggling mortgage customers on to more lenient terms to conceal bad debts.

Lender forbearance – where banks shift homeowners onto interest-only deals, extend their mortgage term, or even permit payment holidays – now accounts for 63pc of all troubled home loans, according to the Financial Services Authority (FSA).

Although forbearance can help households, the FSA is concerned banks are using it to flatter their numbers by reducing bad debt provisions.

In a guidance note on "forbearance and impairment provisions", it said: "We believe that there is scope for considerable improvement in firms' interpretation of the disclosure requirements." A spokesman added that "there are concerns" about banks' use of forbearance.

The regulator fears that "where [forbearance] is provided without due care or understanding of the impacts, it has potentially adverse implications for the customer". In one instance, the FSA said, "more than 95pc of customers requesting a conversion to permanent interest-only terms were found to be in financial stress".

"As a result, firms who have implemented sound checks ... may see their volume of permanent conversions drop significantly."

As many as 300,000 borrowers have switched roughly £60bn of mortgage debt from repayment to interest-only since the financial crisis struck in late 2007, FSA data shows. As forbearance does "not show up in arrears , "[it] may, at least to some extent, be disguising the scale of problems," the watchdog said.

According to research by Fathom Consulting, write-off rates on lending to UK households – currently a fraction of one percent – are no higher than in 2001 despite the recession and a 20pc fall in house prices. In the US, write-off rates have increased fivefold to 9pc since its housing bubble burst in 2007.

I thought this deserved it's own thread, as it's a very different take on the figures previously posted.

This puts a very different spin on things.

The UK banks are clearly screwed, luckily Uncle Merv can give them all the free cash they need in secret. If the Fed offered 0.01% deals I wonder if the BoE is doing the same to selected banks.

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A market about to crash and crash big time. Never felt it so much as I do today.

Builders desperately subsidizing buyers at the expense of shareholders and the integrity of their business and now banks resorting to fraud to cover up the extent of the losses.

Tick tock tick tock tick tock: KA BOOM!

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Same thing in America. Banks don't have to recognise or book the loss from mortgagees who have stopped paying their mortgages, until they actually FORECLOSE. So what happens? There are people who have not paid their mortgages for anything up to 2 years plus and haven't heard a thing from their lender.

Now if we could just get an American-like drop in house prices... :angry:

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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